Why “Low” Capitulation Might Hint At More Pain For Bitcoin Price

The Bitcoin price is stuck in a tight range following yesterday’s U.S. Federal Reserve (Fed) announcement on monetary policy. The global market has been overtaken by macro forces, increasing correlation between all asset classes.

For a deep dive into how the Fed 75 basis point hike affected the Bitcoin price, and a look into the crypto market’s internal dynamics, check out the analysis from our Editorial Director Tony Spilotro. Click the link below.

The Bitcoin price is currently trading at $18,900. There has been a loss of 2% and 7.7% in the past 24 hours and seven days respectively. All crypto top 10 by market capital are experiencing losses over similar periods, except for XRP. XRP continues to trend upwards with a 29% gain in the past week.

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BTC’s price moving sideways on the 4-hour chart. Source: View Tradingview BTCUSDT

Bitcoin Prices Needs More Capitulation

As NewsBTC reported yesterday, the crypto market has completed every major price catalyzer in the short term with the Ethereum “Merge”. The market now moves in sync with macroeconomic and traditional markets.

There might be some room to rally, or even more downgrades, if the major financial indexes continue their downward trend. According to Jurrien Timmer, Director of Macro for investment firm Fidelity, there has been “little capitulation” for the S&P 500.

Timmer is positive that the market remains resilient, despite its downtrend from its all-time peak of 4,819 to the current level at 3,837. Timmer shared this chart with Twitter.

It’s surprising how little capitulation there has been in the market. Although sentiment surveys tend to be negative, actual flows are not. This seems consistent with the lack of volatility in the market (…).

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S&P 500 is far from its 2020 lows. Source: Jurrien Timmer via Twitter

This coincides with Dylan LeClair’s analysis of previous Bitcoin cycles. The analyst believes BTC forms a bottom following a “final capitulation” of the mining sector. The possibility of a network crash could result from this event, but that is still to be seen. LeClair said:

With macroeconomic conditions acting as a catalyst, I think something similar can happen. We’re not there yet.

Bitcoin Will Re-Test its 2020 Lows

However, how low will the Bitcoin price fall and what impact could it have on the cryptocurrency market? This benchmark cryptocurrency has already traded 80% less than $69,000, its highest point. This has historically marked a bottom for BTC’s price and has formed a barrier against further downside.

The Fed’s continued hike in interest rates will likely result in cryptocurrency seeing more sideways movement through 2022. Traditional markets tend to be to the upside, so the crypto might not see a fresh downtrend. A potential downturn in the U.S. currency (DXY), might back this theory.

Although the currency is trending upwards, it seems that it has reached a crucial resistance zone. The crypto market might be able to rally from this point. The chart shows that the DXY Index may be above the threshold for experiencing a surge in selling pressure.

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DXY Index (U.S. dollar) coming into resistance. Source: Jackis (@i_am_jackis) via Twitter

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